Gold climbed to a new 10-week high on Friday on follow-through buying, supported by a weaker dollar that hovered near a record low against the euro.

Other precious metals also advanced, with platinum hitting a two-month high, silver rising to its highest in six weeks and palladium increasing to a two-week high.

Further weakness in the dollar might lift gold to new highs but a recovery in the currency might prompt profit-taking and push the metal down towards $640 an ounce, dealers said.

I am cautious as recent gains have been made purely on a dollar weakness. The price movement is not artificial, but too much dependence on one factor is not healthy, said Matthew Turner, precious metals analyst at Virtual Metals.

Gold will be driven by the dollar, but if the currency doesn't move, then it might come back on profit taking.

Gold eased to $676.40/677.05 an ounce by 1011 GMT from $677.30/678.10 late in New York on Thursday, when it rallied to as high as $677.50 an ounce on a weaker dollar.

The dollar hovered near a record low against the euro on lingering worries about the U.S. housing market.

The U.S. currency limped after Federal Reserve Chairman Ben Bernanke on Thursday said losses on subprime loans could hit $100 billion and threaten consumer spending.

Any further negative news from the U.S. brings back into focus the possibility that the interest rate differential between the United States and Europe may widen much quicker than anticipated at present, Calyon Corporate and Investment Bank said in a research note.

This makes it increasingly likely that we will see some positioning in the near future around sustained weakness in the dollar and hence, gold prices should remain well supported.

FOCUS ON EXTERNAL MARKETS

A weaker dollar makes gold cheaper for other currency holders and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

While gold has not been racing higher, the metal has still notched up steady gains this week, which should continue in the week ahead as both oil and the dollar look set to continue their recent trends, said James Moore, analyst at TheBullionDesk.com.

Oil steadied near $78 a barrel, but remained within sight of its all-time peak.

In other precious metals, platinum has been supported by wage negotiations in South Africa, the world's largest producer, as well as an expected drop in sales by Lonmin Plc, the world's third-biggest platinum producer.

The price action in platinum is unrelenting and ... the market will likely continue to push higher while there is significant uncertainty around the South African mining situation, J.P. Morgan Securities said in a daily note.

Platinum hit a high of $1,333 an ounce and was last quoted at $1,330/1,334 an ounce, versus $1,320/1,325 in New York, while silver was at $13.33/13.37 an ounce after rising to $13.38, against $13.24/13.29 in the U.S. market.

Palladium rose to a two-week high of $370 an ounce before dropping to New York's level of $369/372.

Ben Bernanke Gold